Policies for Food

A sub-set of trade policy concerns food aid. Such aid has been criticized on grounds that it weakens incentives for domestic producers. In the long run, a recipient country may benefit more from financial aid than from food aid, using the funds to enable poor families to purchase their food requirements on the domestic market. Shlomo Reutlinger has presented forceful arguments for the advantages of financial aid over food aid:

Putting it bluntly, food aid is the product of an era in which governments, in both the industrialized and the developing countries, were expected to intervene in the production and marketing of food in a big way. . .. The most sweeping challenge to the notion that food, more than other aid is needed, arises from the now widely accepted view that poverty, and not the food supply or under-performing food markets, is at the root of hunger and malnutrition. ... If the cause of hunger is not lack of food in the market, the choice between food and financial aid can be based solely on the basis of efficiency calculations. . . .

People could have obtained more, and better suited food to their needs, if given cash to purchase food in local markets. Not only this, it is increasingly recognized that malnutrition can not be prevented by food alone. Aptly, food aid is wastefully used when people have to convert food into cash (because in some emergency situations, the only aid provided is food aid).34

However, as long as food aid is present, the concessional component of the aid always represents a net economic gain for the recipient country, and so the principal challenge is how to use the aid to fortify domestic production and marketing systems. This concern, and a constructive approach to addressing it, have been described for the case of Mozambique:

. .. large amounts of [imported] low-priced yellow maize can restrict the urban market for domestically produced white maize and have adverse effects on Mozambican producers. . .. instability in yellow maize prices, caused by

33. Shubh K. Kumar, 'Design, Income Distribution, and Consumption Effects of Maize Pricing Policies in Zambia', in Food Subsidies in Developing Countries: Costs, Benefits, and Policy Options, P. Pinstrup-Andersen (Ed.), The Johns Hopkins University Press, Baltimore, MA, USA, 1988, Chapter 21, p. 295.

34. Reprinted from Food Policy, 24(1), S. Reutlinger, 'Viewpoint: from "food aid" to "aid for food": into the 21st century', pp. 7 and 12-13, Copyright (1999), with permission from Elsevier.

irregular food aid arrivals, has been transmitted to the white maize market.. . . the management of commercial and emergency food aid created large rents for consignees prior to the southern Africa drought, and significant losses for at least a year after that time. These conditions are clearly not conducive to the development of an efficient and effective maize production and marketing system in the country.

On a more positive note, the food aid program's emphasis beginning in 1992 on creating competitive marketing conditions for food aid facilitated the growth of the informal marketing system and the small-scale milling industry. Both now play key roles in linking Mozambican producers and consumers and providing consumers with affordable maize products. This is an important example of how food aid can be used to help develop markets, and represents a major accomplishment of the food aid program in Mozambique.35

In addition to directing the proceeds of food aid to the most constructive uses in this sense, it is important to avoid conferring tariff exemptions on the products imported through the food aid program, as pointed out above, in order to minimize the disruptions of incentives for domestic producers.

The advantages and disadvantages of food aid have been assessed by the Overseas Development Institute (ODI), which has attempted to summarize the growing consensus on the topic. First, the ODI makes a basic distinction:

Food assistance describes any intervention designed to address hunger, in response to chronic problems or short-term crises. Food assistance may involve the direct provision of food, for example in supplementary feeding or food for work projects. Equally, it may involve financial interventions, for example to support food subsidies or price stabilization schemes. Food assistance may be funded largely internally, as in India, or be supported by internationally sourced food and financial aid, as in Bangladesh or Ethiopia.

Food aid is commodity aid that is used either to support food assistance action or to fund development more generally, by providing balance-of-payments support in substituting for commercial imports, or budgetary support through the counterpart funds generated from sales revenue. Food aid transfers are required to meet the Development Assistance Committee (DAC) criteria for official development assistance (ODA) - grants or loans with at least 25% concessionary.36

Then, the ODI synthesizes research findings on food aid that point to a need to re-think its role and plan its use in a broader context:

Relief food aid plays a clear and crucial role in saving lives and limiting nutritional stress in acute crises caused by conflict or natural disaster. However, there is frequently a lack of robust evidence quantifying its impact, much evidence of ineffectiveness, and some evidence of late-arriving, inflexible relief hampering the recovery of local economies affected by natural disaster.

Developmental food aid has proved relatively ineffective in the 1990s as an instrument for combating poverty and improving the nutritional and health status of vulnerable people. Program food aid, which is provided to governments for sale, is a particularly blunt instrument for these purposes. Robust evidence on impacts of project food aid, which provides food directly, is lacking because of inadequate performance monitoring, in particular of the effectiveness of targeting and impacts on human resource development.

35. Reprinted from Food Policy, 21(2), D. Tschirley, C. Donovan and M. T. Weber, 'Food aid and food markets: lessons from Mozambique', pp. 205-206, Copyright (1996), with permission from Elsevier.

36. Reproduced from Overseas Development Institute, Reforming Food Aid: Time To Grasp the Nettle?, ODI Briefing Paper, Overseas Development Institute, London, January 2000, pp. 1 and 2, with permission of the Overseas Development Institute.

Financial food aid is a more efficient way in most circumstances of funding activities such as school meals or food-for-work, or providing balance-of-payment or budgetary support for general development of food security. Hence the massive fall in program food aid and the slow decline in WFP [World Food Program] development activities.

Success in mitigating the effects of natural disasters and conflicts indicates that food aid has a continuing role in emergency relief and post-crisis rehabilitation, though with considerable scope for improved performance. It can also be useful as targeted assistance to highly food-insecure people in situations of poorly functioning fragile markets and serious institutional weakness. However, it has not proved an effective or efficient instrument for supporting poverty reduction strategies more generally.

The implications are clear. Hunger remains an important problem, and one that needs a comprehensive package of food assistance measures, devised and implemented nationally, and with international support. Food aid has a positive but limited role to play in this task, especially in emergencies. It needs to be planned and managed in the wider, food assistance context. Unfortunately, current rules and institutional arrangements continue to treat food aid as a special case.37

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